Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

SOLUTION TO EXERCISE 7-2

Situation 1: The independent internal verification principle is being violated. The cashier may collect the ticket price from a customer and pocket the cash then not give the customer a ticket. Because sales are tracked by tickets, the theft will most likely occur undetected. On the other hand, the cashier may collect the price of an adult ticket, ring up the price of a child's ticket and pocket the difference in price. Because no one independently verifies the sale, the theft can easily go unnoticed.

Situation 2: The documentation procedures principle is being violated. If the customer cannot see the display and receives no written evidence of the amount rung into the register, the clerk can easily tell the customer the correct total but ring up less than that amount. The difference can be pocketed by the employee and go undetected.

Situation 3: The human resource controls principle is being violated. The company should conduct a thorough background check on the prospective employee before hiring them.

Situation 4: The segregation of duties principle is being violated. The employee can make improper disbursements and have them go undetected because the employee has access to the records and can “doctor” them.